It’s no secret that home prices are dropping, in fact, I’d be willing to bet you couldn’t flip through one round of TV channels without seeing something about foreclosure or declining home prices. If you’ve already canceled your cable, to save money, open up any newspaper and you’ll see articles on foreclosure and the horrible housing market. The market has not just taken a turn for the worse, it seems to be in a nose dive that hit the ground and just kept going. The FDIC has described the housing market as a “whirlpool spinning out of control” and they don’t expect it to stop any time soon.
Many homeowners had their life savings tied up in the equity in their home, and now it’s all gone and they’ve found themselves in debt, owing more than their home is worth. For some they will hold out and hope the market improves, but for others, (most others) they will end up selling at a huge loss or losing the home to foreclosure. The latter of these two will face one of the toughest hardships of their life. The loss of a home and a hardship of this magnitude can spiral out of control and result in many other financial and personal problems. I have personally seen foreclosure cause divorce, mental illness, physical illness, and even death. The legal problems with foreclosure are only the beginning, once the legal matters are over, the process of moving on can be nearly hopeless. Deficiency judgments and other debts caused by foreclosure can amount to hundreds of thousands of dollars and create a hole that’s impossible for some to crawl out of.
On top of all these problems, the credit scoring system (that we’re all forced to be a part of) is saying these people are now a poor credit risk and telling everyone in the world to avoid doing business with them. So even renting a home is impossible for many victims of foreclosure. Needless to say, getting a fresh start after foreclosure is not possible. No matter what your circumstances are, if you let your home go to foreclosure, you should prepare for one of the toughest battles of your life.
Here are some tips to help you avoid some of the common mistakes with foreclosure:
If you think you may miss a payment, get your home listed immediately. The longer your home is on the market, the better the chances of selling it at a reasonable price are. There are companies that specialize in selling foreclosure homes and can negotiate with lenders to eliminate excess fees or deficiency judgments. Seek out a company or Realtor who has experience with foreclosure properties. I know you may not want to sell your home, but most people who enter foreclosure end up losing their home, so you need to take immediate action once you find yourself in this situation.
Hire a professional to work with your lender. I used to recommend doing this yourself, but today, you don’t have the time to waste and you don’t have the knowledge. You need to have a professional working with your lender, who knows the rules/laws and has the experience needed to successfully mitigate a foreclosure case. This can be an attorney or loss mitigation specialist, but make sure you check out the company before paying them. Meet with them in person or at a minimum, do a phone interview before sending any money.
Save as much money as possible and liquidate your belonging to raise money. In many cases, your lender can offer a lower rate/payment if you can make a few of the “workout” payments on time. This can make the difference between losing your home and keeping your home with a loan modification or foreclosure workout plan. Getting a second job, selling a car, or renting out an extra room, can all help you raise money to avoid foreclosure.
Don’t waste time. This is probably the most important advice I can give on foreclosure. Many people spend too much time doing research and talking to people about their options, rather than taking action to stop the problem or reverse the foreclosure process. You need to act fast if you want to keep your home. Don’t wait until you are 30 days away from foreclosure to ask for help. You need help from day one! Talk to a Realtor if you want to sell, or find someone who can help you work with your lender. Don’t think that things are going to get better on their own; you need to take action immediately, before it’s too late.
Losing your home and equity is something you can avoid, so take action today and find the help you need to save your home or avoid foreclosure.